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Doug: Well,
that's only the second time I've ever called a US presidential election
accurately, so I won't let it go to my head. However, although I know most
readers were rooting for Romney because he appeared to be the lesser of two
evils, it's quite arguable that we're better off – for the long run
– with the disastrous Obama.

Let's look at the bright side: first, as you mentioned,
Obama will get blamed for the Greater Depression. But also, Romney appeared
even more warlike than Obama, and war is the health of the state. Despite the
US's huge, unsustainable deficits, he actually promised to increase military
spending – presumably using money borrowed from the Chinese. Plus, he
promised not to cut medical and welfare spending. But those are consequences
we'll never see now.

The actual reason Obama won, in addition to his
promises of a free lunch for everyone, is that people are much more socially
liberal than in the past. They don't want the state putting its nose into
their bedrooms with bans on gay marriage, abortion, and the like. Romney was
a throwback to the '50s – even down to that phony, condescending smile
that was always painted on his face. So let's batten down the hatches for
four more years, recognizing there were no good choices.

But what's really on my mind this week are things
military, starting with the expanding sex scandal involving top military
brass and the newly deposed head of the CIA, General Petraeus.
Then we can get into the 19 reasons why the continuing war in Afghanistan is
a total disaster.

L: You've
always said that once you get above the staff-sergeant level of the military,
it's hopelessly corrupt, and that generals above two stars are necessarily
political operatives. The top spot of any government agency is always a
political appointment anyway, and we all know that your regard for
politicians couldn't get any lower – so this can't be a surprise.

Doug: No, it's no
surprise – just more evidence for those who care to open their eyes as
to just how dysfunctional things are at the top.

L: But is this
really a sign of corruption? A famous – or infamous – bon
vivant like you can't possibly care whom generals screw, as long as it's
not taxpayers?

Doug: True. I
couldn't care less who's sleeping with whom; it's
just that these people are typically such self-righteous hypocrites. But for
all we know, Petraeus had an open relationship with
his wife and wasn't even cheating. Given that what we read in the papers
doesn't count as knowledge, only selective reporting of facts released by the
government, buttressed by hearsay, conjecture, and lawyered-up statements, we
really know almost nothing. As Mark Twain said, if you don't read the papers,
you're uninformed; if you do read them, you're misinformed.

But as a matter of principle, it's always an excellent
thing to see the mighty in these praetorian agencies fall into disgrace.
Almost by definition, only bad apples can make it to the top in them, and
they deserve to fall. I can only hope this scandal will grow and expose the
CIA for being the corrupt, incompetent agency it is, and the entire thing
will be abolished.

L: You're an
optimist. But I should have known that if you had an opinion about Petraeus, it wouldn't be based on unverified information,
but on principle. And as a matter of principle, I'd have to say that a guy
who's supposed to be the country's top spy and can't even keep a romantic
liaison private doesn't seem fit for the job.

Doug: Yes,
although the very foundation of the CIA – its whole raison
d'être, its essential modus operandi – is based on
lies, cheating, and deception. You've got to expect the worst from these
people, even while they sanctimoniously blather on about things like loyalty,
truth, and honor. Such concepts are as alien to them as they were to the KGB
and the Stasi.

The whole rotten mess of lies, failures, and cover-ups
turns my attention to an interesting article I read in the Washington Post
a few months ago. It was a list of 19 things Afghanistan veterans agree are true,
but that generals don't dare say in public. I'm no fan of the Washington
Post, but one can't disregard a message simply because one doesn't like
the messenger. The list of unacknowledged facts "everyone knows"
but can't speak out loud is not just interesting, but impresses me as
extremely accurate. It details what a disaster the US misadventure in
Afghanistan has been and continues to be.

L: For
example?

Doug: It starts
with this assertion: "Pakistan is now an enemy of the United States."
This impresses me as being a completely accurate allegation. The place is not
really a country at all, but an agglomeration of dozens of Islamic tribes
– most of which are at odds with each other – cobbled together by
the British in the process of granting India's independence. It will
eventually fall apart into any number of satrapies, principalities, and
warlord fiefdoms. That might not matter to people who live on the far side of
the planet, except that the current country is said to possess about 100 nuclear
weapons, some of which are bound to fall into the hands of some real Bad Boys
when the place inevitably implodes.

L: Makes
sense. Also, though I don't claim to have much in the way of real facts at my
disposal, it's hard for me to believe that Osama bin Laden was able to set up
an extensive household – we're supposed to call it a
"compound" if we don't like the people inside – right under
the noses of Pakistani security without anyone in power there knowing what
was going on. And whatever else may be said, harboring an enemy is hardly the
act of a friend.

Doug: That's
right. The next point, referring to Afghanistan, is: "We don't know
why we are here, what we are fighting for, or how to know if we are
winning."

This seems absolutely true to me. The US went to
Afghanistan because a group almost entirely composed of Saudis supposedly
flew a couple of airliners into buildings in the United States. It was
alleged that the Taliban in Afghanistan was sympathetic to them and gave them
succor. That's no reason to invade a country, but they did, and the Taliban
government was toppled – but the US is still there more than a decade
later. So, it's true. No one really knows why our troops are still there,
making enemies while bankrupting the US. It's a complete boondoggle and
disaster.

L: The
government was toppled, but the enemy merely dispersed. An expensive failure.

Doug: Exactly;
the Taliban itself had absolutely nothing to do with the events of 9/11, and even
offered to cooperate in extraditing those responsible upon presentation of
proof.

The next item is: "The strategy is to fight,
talk, and build. But we're withdrawing the fighters, the Taliban won't talk,
and the builders are corrupt."

This is true as well. Almost everyone there hates the
foreign invaders as much as Americans would hate an army of Muslim teenagers
in the US. Fighting is just making more enemies, so of course the troops are
being withdrawn. And why should the locals talk with the invaders? They know
they'll go away eventually, as the Soviets did, and others before them. The
builders, of course, get overpaid to build schools, hospitals, and other
future targets for bombing; their only concern is to steal as much as
possible while they can. The whole thing would be a comedy of errors if it
weren't such a tragedy.

L: We've
filled a lot of holes in the sand and made a lot of new ones. Krugman must think it's a great stimulus to the economy.

Doug: War also
sends a lot of unskilled labor off to the slaughtering fields, so maybe the
politicians view this as a good way to reduce unemployment. But to continue,
the next point is: "Karzai's family is especially corrupt."

Well, that goes without saying. The whole point of
getting elected – especially in these backward, tribal countries
– is to steal as much as you possibly can. It's not just an assumption;
it's axiomatic all over Africa, Asia, and South America – and for that
matter in the US as well. How else could a man from a white-trash family like
Bill Clinton start with nothing, get elected and end up worth a hundred
million dollars? Of course now in the US, you wait until you're out of office
to get a delayed payoff in the form of huge speakers' fees, corporate
directorates, consulting contracts, book advances, and sweetheart deals.
Lyndon Johnson was a more classic example, in that he made it while he was
still in office. But it's worse in these backward countries, where the
plunderers can operate with much more brazenness and impunity.

L: Nolo contendere.
Next?

Doug: "We
want President Karzai gone but we don't have a Pushtun
successor handy."

This speaks again to the fact that Afghanistan is a
totally artificial country, assembled from a bunch of mutually antagonistic
tribes. Of course we don't have stooges from each possible faction warring
for control. We're outsiders. Does Washington really think the locals will
accept any quisling we put in charge of them?

The next point is more interesting: "The
problem isn't corruption, it is which corrupt people
are getting the dollars. We have to help corruption be more
fair."

As we've pointed out in a previous conversation, corruption can actually be a good and necessary thing.
That's the case whenever irrational, counterproductive laws slow the economy
and stifle society – then you need a way around them, just to survive.
This absolutely applies in Afghanistan. The US is the major cause of
corruption today, even as it talks about eliminating corruption. The locals
think we're not only stupid, but hypocrites as well.

L: The exact
opposite of "winning hearts and minds…"

Doug: The next
one is a good one: "Another thing we'll never stop here is the drug
traffic, so the counter-narcotics mission is probably a waste of time and
resources that just alienates a swath of Afghans."

That's absolutely true. I understand that opium is
essentially Afghanistan's only export product. So when Americans or anyone
else invades and destroys their only cash crop, it only makes the Afghans
hate them more. It makes no dent at all in the trade, because destroying a
crop drives up the price. And that encourages farmers to plant more next
season, and be more clever about it.

It's completely idiotic to fight and kill poor farmers
around the world who grow plants just because a few uptight puritans in the
West don't like them. If the monumentally stupid War On Some Drugs were ended and recreational drugs were
legalized, almost all the ills associated with drug use would go away.

L: Did you see
that in the recent US elections, referendums legalizing marijuana were passed
in two states? Not just medical marijuana, but recreational use as well.

Doug: Yes –
Washington and Colorado. It'll be interesting to see if
that catches on. I think the majority of Americans today favor ending
marijuana prohibition, but the politicians don't realize it yet. This may at
last be the boy shouting out that the emperor has no clothes.

L: You really
are in an optimistic mood today… So, next?

Doug: "Making
this a NATO mission hurt, not helped. Most NATO countries are just going
through the motions in Afghanistan as the price necessary to keep the US in
Europe."

This is interesting and probably true. One has to
wonder why anyone should want US troops in Europe today, now that the Cold
War has ended. My guess is that it's because US troops are relatively highly
paid, and US bases contribute huge amounts to local economies. Losing them
would be like wiping a bunch of cities with big import industries off the
map. US soldiers in Europe serve absolutely no useful purpose – except
to pad the income statements of defense contractors and stimulate the local
economy. Although they spend their money mostly in the bars and cathouses.

But the next point is more interesting: "Yes,
the exit deadline is killing us."

Well, of course! If the people you're fighting know
exactly when you have to leave, they know when you will have to demobilize
and become vulnerable. And they know they can just wait you out. This just
underscores how pointless the whole charade is.

Then: "Even if you got a deal with the Taliban,
it wouldn't end the fighting."

Again, of course: there are many tribes and warlords
there with their own agendas. Focusing on one group – the Taliban, which
is just a coalition anyway – seems to me to be more of a
public-relations exercise than anything to do with reality on the ground.
Fighting has been the national pastime in this part of the world for many
centuries.

L: When it
comes down to it, isn't the basic reality that the US is not fighting a
government or other organization that can be decapitated and neutralized?
They won't admit it, but they are fighting a culture, a way of life –
an idea. It's like a hydra: you cut off one head, and two more grow back to
replace it. As long as there's a single person left alive who believes it,
the fight will never end.

Doug: Yes; cloud-sourced warfare. This relates to the next point,
which really is the bottom line: "The Taliban may be willing to fight
forever. We are not."

This is so obvious, but so important. Of course the
locals don't want these blue-eyed invaders and infidels to tell them how they
should do things in their land. And most US taxpayers can't even find
Afghanistan on a map – and yet they're being told it's vital to their
interests to send their sons there to die. This is completely unethical and
counterproductive.

L: Next?

Doug: "Yes,
we are funding the Taliban, but hey, there's no way to stop it, because the
truck companies bringing goods from Pakistan and up the highway across
Afghanistan have to pay off the Taliban. So yeah, your tax dollars are
helping Mullah Omar and his buddies. Welcome to the neighborhood."

This just goes to show how smart bin Laden's strategy
of provoking the US into bankrupting itself was. Getting back to Petraeus, who was running the show in Afghanistan for
many years: if he had any gumption or sense of strategy, he would have
recommended pulling out or resigned for this very reason. He would have
admitted the untenable logistics and pulled out. Instead, he endorsed the
troop surge and so forth. He's just a slick bureaucrat.

Next up: "Even non-Taliban Afghans don't much like
us."

That's laughably obvious, but the author is right that
people just won't talk about it. Many fools think that invading Afghanistan
is like liberating France or Belgium during WW2 – but it's just the
opposite. You knock down people's doors in the middle of the night, you bomb people's wedding parties, and send in
drones to strafe them… You kill tens of thousands of people: of course
they won't all be Taliban, and of course the rest of the locals won't like
you.

The reality here is that the US is making ten enemies
for every real or imagined enemy killed – almost all of whom are of no
possible threat to the US today.

L:
Perpetuating the forever war. If it's true that war is the health of the state,
maybe this is not an accident, and maybe those at the top are evil, not
stupid?

The next point is: "Afghans didn't get the memo
about all our successes, so they are positioning themselves for the
post-American civil war."

Well, that's certainly true. As we said before, it's
not a real country – it should be at least a half a dozen, based on
languages and tribal groupings. Of course they'll have a civil war as soon as
the foreign power holding the place together is gone, and they all fight for
the right to exploit each other.

L: Okay, no
need to belabor that one… Next?

Doug: "And
they're not the only ones getting ready. The future of Afghanistan is
probably evolving up north now as the Indians, Russians and Pakistanis jockey
with old Northern Alliance types. Interestingly, we're paying more and
getting less than any other player."

This is absolutely true. And I'd add China to the list
of interested parties. Any country within reach and with an interest in
plundering some part of Afghanistan's resources will be jockeying for
position with the various local factions to gain their support for future
economic looting.

Next: "Speaking of positioning for the
post-American civil war, why would the Pakistanis sell out their best proxy
shock troops now?"

Well, if the first point is true – that Pakistan
is an enemy of the US – then it's in their interest for the US to use
up its weapons and bankrupt itself blowing up sand and rocks in Afghanistan.
Covert Pakistani support for the Taliban only makes sense.

And: "The ANA and ANP could break the day after
we leave the country."

That's the Afghanistan National Army and Police, organizations set up by the US – members of
which are already opening fire on US troops. The enemy has already
infiltrated these organizations. Given all that we've said about all the
mutually hostile groups in Afghanistan, of course they won’t last. It's
completely hopeless and naïve to think they won't disintegrate and use
their weapons to fight each other.

L: Agreed.
Next?

Doug: "We
are ignoring the advisory effort and fighting the 'big war' with American
troops, just as we did in Vietnam. And the US military won't act any
differently and work with the Afghan forces seriously until when American
politicians significantly draw down U.S. forces in country – when it
may be too damn late."

This seems true and gets back to the question of why
the US has troops there in the first place. Assuming the cover story of
attacking the Taliban because they supported the 9/11 terrorists even made
sense to begin with, that was over and done with long ago. The whole thing is
a nonsensical fiasco. It's just like in Vietnam, where US troops did all the
fighting to support a puppet government. Then the whole artificial structure
collapsed when they left.

L: This
reminds me of what you've said about the military always fighting the
last war. But these guys aren't just fighting the last war,
they're fighting the previous one, which was also a disastrous failure.

Doug: Yes, and to
top things off, I believe the locals and other Muslims around the world are
really beginning to see US foreign policy as a War On Islam, under cover of a
War On Terrorism. Well, there are more Muslims than Christians in the world, and more of them have little to lose and not much
better to do than to join the fight. It's a no-win scenario.

The last one is: "The situation America faces
in Afghanistan is similar to the one it faced in Vietnam during the Nixon
presidency: A desire a leave and turn over the war to our local allies,
combined with the realization that our allies may still lose, and the loss
will be viewed as a U.S. defeat anyway."

Well, our only allies are people who are collaborators,
swilling at the trough created by the US military and various US Government
agencies. The people in and around the Karzai government are only our allies
so long as that enables them to steal as much as possible. I'm sure Karzai
has already salted away a couple billion dollars in various places around the
world and has a jet ready to whisk him out of the country as soon as he loses
his grip. When the fundamentalists win, the collaborators will be hung
– just like the French hung the Nazi collaborators at the end of WWII.
So, yes, it's just like Vietnam, propping up a totally corrupt and
dysfunctional puppet government, until the mobs tear it apart.

L: Okay, I get
that… But the impending failure of the US military in Afghanistan is both
beyond my control and far from my direct concerns – except for possible
investment implications. What do you see?

Doug: It's all
more evidence of the intractable nature of the problems facing the world
today, when those supposedly in charge cannot allow themselves to admit even
the most obvious truths that strike anyone with open eyes right away. The US
is as corrupt as the governments it's supporting. It's going to bankrupt
itself in the process. It's going to destroy the dollar. It's destroying freedom
in the US. And the average American is going along with all of it –
just like the average German did in WWII.

This underscores what we've been saying about rigging
for stormy weather, investing in gold, speculating in "crisis
investing" type stocks, and diversifying internationally to mitigate
your own political risk.

L: [Sighs] And
this was looking on the bright side? Okay Doug, thanks for your thoughts.

Doug: You're
welcome.

Now that the
US has re-elected President Obama and kept a split Congress, we could be in
real trouble. This is the same cast of characters that failed to address the
critical issues of massive debt and reckless government spending.

There is
nothing to suggest they will tackle these problems now.

What happens
if they don't stop us from plummeting off the fiscal cliff? Would a
compromise solution be better for the country?

And what
about QE-Infinity? What happens to the purchasing power of our savings if the
Fed keeps its easy-money policies? Will our economy make it if Washington, DC
can't come together?

To help you
answer questions like these, the folks at Mauldin Economics are putting
together a free online event featuring some of the world's leading economists
and investing experts.

They will
discuss such critical issues as the fiscal cliff, ballooning deficits and
debt, entitlements, the Fed's easy money polices, and the world economy. More
important, they'll offer solutions – including solutions to help you
protect what's yours from new risks in the post-election economy.

Mr. Casey is the author of four books, the best known of which is Crisis Investing, which was #1 on the New York Times Bestseller list for 29 weeks. He has travelled to over 140 countries, many of them several times, and he analyzes what he finds - in real estate, world stock markets, commodities and mining - in his monthly newsletter, The International Speculator, which he has written for 18 years